© Reuters. FILE PHOTO: US dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration
SINGAPORE (Reuters) – The dollar held firm on Monday but was still near multi-week lows against some of its major peers, with traders on guard ahead of central bank meetings this week, including that of the Federal Reserve where it will announce its decision on rates. .
The US currency was pinned near a one-month low against the British pound and early Asian trade at $1.25805 and $0.6745, respectively, although moves were moderate, most of Australia being closed for holidays.
Policy meetings from the Fed, European Central Bank (ECB) and Bank of Japan (BOJ) will set the tone for the week, as markets seek clues from policymakers on the future path of interest rates .
“Given the risks of events ahead of us, market activity should be relatively subdued today,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
Money markets are leaning toward a pause from the Fed when it announces its interest rate decision on Wednesday, according to CME tool FedWatch, expectations that sent Wall Street to a 13-month high on Friday as that the feeling of risk was improving.
The fell nearly 0.5% last week, its worst weekly decline since mid-April, and was last slightly higher at 103.58.
Conversely, a clear majority of economists polled by Reuters expect the ECB to raise its key rate by 25 basis points this week and again in July, before pausing for the rest of the month. year, with inflation remaining sticky.
The euro slipped 0.02% to $1.0744 in early trading in Asia, after rising 0.4% last week, its first weekly gain in about a month.
“Apart from the decisions central banks make at this meeting, what will be of particular interest are their forward guidance,” the ANZ economists wrote in a note.
“Central banks have been raising rates aggressively over the past 12-15 months and given the lagged effects with which monetary policy affects demand, are central banks taking a break like the RBNZ ?”
The Reserve Bank of New Zealand signaled last month that it had completed its tightening after raising rates to a 14-plus-year high of 5.5%, ending its most aggressive hike cycle since. 1999. This caused a 2.7% drop in May.
The Antipodean currency was 0.07% lower at $0.6126, but was not too far off a more than two-week high of $0.6138 hit on Friday.
Elsewhere, the Japanese yen stabilized at 139.35 per US dollar.
The BoJ is expected to maintain its ultra-loose monetary policy this week and forecast a moderate economic recovery as robust business and household spending cushions the blow from slowing foreign demand, sources told Reuters.
“We are changing our call from the BOJ for no YCC revisions at this week’s meeting,” said Societe Generale’s Jin Kenzaki (OTC:), referring to the bank’s controversial yield curve control policy. central.
“However, we still think the BoJ could widen the range at its July meeting.”
Data released on Monday showed that wholesale inflation in Japan slowed for a fifth consecutive month in May due to lower fuel and commodity prices, a sign that the cost pressure that has driven up the consumer inflation could subside.